Two new schemes introduced by the Malta Development Bank (MDB) can facilitate up to €180 million of new investment in the Maltese economy. In his 2022 annual report statement, Josef Bonnici, chairperson of the MDB, said that the bank is determined to magnify its outreach to continue to stimulate SME lending.

“We are determined to magnify the outreach of MDB’s promotional role by collaborating with multiple credit institutions to stimulate more active SME lending in Malta by offering the opportunity for commercial banks to act as our intermediary partners. Indeed, it is encouraging to see strong interest by banks, and we are pleased to have four of the main commercial banks in Malta expressing their interest and being accredited to act as intermediary partners of the MDB.”

Throughout 2022, Prof Bonnici noted, the bank launched two new “flagship” schemes to support fresh SME investment. These two schemes are the SME Guarantee Scheme, an uncapped portfolio guarantee scheme, and the Guaranteed Co-lending scheme, a risk-sharing facility involving co-lending of up to €100 million between the MDB and the accredited credit institutions.

“Our schemes,” Prof Bonnici wrote, “are effective in providing the mechanism to mobilise private investment through risk mitigation and are consistent with MDB’s objective to improve access to finance and to diversify the financing options to SMEs.” He goes on to delineate how the “Guaranteed Co-Lending Scheme is particularly innovative, even by European standards, as it introduces a new scheme of co-financing with commercial banks, blended with a partial guarantee of 60 per cent that can address the financing needs of larger projects up to €10 million. Projects that may be considered by a commercial bank as too large or too risky - especially those investments in intangibles related to technology and digitalisation - with the involvement of the MDB such projects can be assisted with the appropriate financing solution.” Prof Bonnici also highlighted that start-ups “willing to commercialise their technological and innovative ideas” got a specific allocation of the portfolio.

MDB has also been “very active in strengthening itself to meet the requirements of managing such high-level portfolios,” Prof Bonnici remarked. The bank achieved this by seeking the support of the European Investment Fund (EIF) through risk sharing instruments under the Pan-European Guarantee Fund (EGF). The Chairman explained that the bank will be “taking this forward by seeking to achieve the status of becoming a direct implementing partner of the InvestEU. As Malta’s promotional bank, it is our objective to act as Malta’s gateway to EU financial instruments that enable greater risk sharing and a magnified transfer of benefit to Maltese businesses.”

Prof Bonnici expressed also how “very fond” he was of MDB’s staff’s efforts to “undertake a genuine ESG journey.” He underscored the bank’s commitment to develop an ESG strategy by the end of 2023, and went on to explain that “this strategy is of a dual nature: one aspect shall focus externally on a review of guidelines covering credit and risk assessments of the bank’s promotional schemes which shall be finetuned to give more accent to ESG considerations; the other aspect concerns the way we work, focusing on internal measures aiming to embrace ESG principles, including in the way we manage our building, our waste management efforts and in ensuring equality at all levels of our operations.”

In his concluding remarks, the MDB Chairperson wrote that the bank will “continue to strive to achieve a balance between sustainable profitability and growth against the appropriate risk levels by making sound business decisions and lend or invest funds in projects that are consistent with Malta’s development objectives.” He also expressed his gratitude to the Ministry for Finance and Employment for “supporting the bank, and in particular for strengthening its capital base by an additional €20 million injection, to reach €80 million.” This level of support, “will enhance the bank’s risk absorption capacity to continue supporting sustainable growth by driving competition, enabling innovation, and improving access to finance.”